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May 9th, 2010
On May 6th, 2010, the Dow crashed 1000 points within 20 minutes. As with all unexplained market movements, unsubstantiated rumors popped up to explain the movement. The most sensational one was that a single human was to blame. A “fat fingered” trader supposedly punched in a B for billion instead of an M for million, and ordered 16 Billion shares of stock PG to be sold, triggering electronic selling of the entire market.
For a few experienced investors, this was an obvious erroneous rumor for a variety of reasons. First of all, PG stock has less than 3B shares in total, so a 16B order would never have been accepted. Moreover, traders have been well aware of the problem of programmed trading that can drive massive volatility and short selling.
Nevertheless, the TV news ran with the unsubstantiated rumor that a “fat finger” trader was the cause. They cited no sources other than, “We are hearing”.
This is the story of just how bad some aspects of national TV network journalism can be at times. Watch the video sequence of events as the “fat finger” rumor went from a NYSE floor rumor, to a speculative comment on the business shows, to becoming fact on the regular news that evening. Finally, the next day, ABC’s George Stephanopoulos began to correct the mistakes, and Fox Business confirmed that human error was not the cause.